ADMIS News
COCOA
The cocoa market is overbought, and funds are heavily long and represent a long liquidation threat, but there is no indication of a top. September cocoa was lower yesterday but higher again overnight and remains within striking distance of last week’s contract high. The global/supply demand balance is expected to see a second production deficit in a row this year, and El Nino threatens to extend that into a third year. The West African harvest was delayed by heavy rainfall and flooding earlier this month, and mostly dry conditions last week allowed harvest to resume, but major growing areas have rainfall in the forecast through the end of the month with the heaviest daily totals expected this weekend, which could cause further delays and raise concerns about disease.
COFFEE
An active harvest pace in Brazil has loosened global coffee supplies and kept the market on the defensive this week, and the weather forecast suggests this could continue. Brazil’s 2023/24 harvest reached 39% of the total area as of June 20 versus 35% a year ago and a five-year average of 42%, according to consultancy Safras & Mercado. Above average rainfall in April delayed the maturing of crops, but May and June have been mostly favorable for harvest. Brazil is expected to see widespread warmth and dryness over the next 10 days, which will limit the risk of frost and allow harvest to continue at a strong pace. The USDA has forecast 2023/24 global coffee production at 174.340 million bags, up from 170.019 million in 2022/23 and a 5-year high. ICE exchange coffee stocks increased by 5,533 bags on Thursday, with 10,887 bags going through the exchange’s grading process. This is the first that time stocks have increased in several weeks. On Wednesday they had fallen to their lowest level since November.
COTTON
December cotton fell to its lowest level in a week on Thursday but held previous lows from June 15 and May 25, keeping the consolidation pattern intact. One factor that may be keeping the December contract from collapsing is the hot and dry spell heading to West Texas. As of June 20, approximately 16% of US cotton area was under drought versus 18% on June 13, 19% on June 6, and 28% on May 30. The 7-day forecast shows above normal temperatures and normal to below normal precipitation across the region, with a slight to moderate decline in soil moisture. The crop is in decent shape, and soil moisture levels are much improved over last year, but the trade will watch these developments over the next week or so. On the demand front, the trade will be looking to see if there is an improvement in export sales from last week’s 164,651 bales, which was down from 511,215 the previous week.
SUGAR
A strong Brazilian harvest and anticipated monsoon rains for India’s growing regions have set the sugar market up for a test of the June 6 low. Despite some minor delays this month, Brazil’s Center-South cane harvest and sugar production remain well ahead of last season’s pace. Center-South mills are increasing sugar’s share of crushing this season. A pullback in energy prices yesterday put additional pressure on sugar on ideas it would keep Brazilian cane mills focusing on sugar production as opposed to ethanol. There is no rain in the forecast for Brazil until at least July 5, which should allow harvest to proceed at a strong pace. India’s monsoon has regained momentum over the past few days, and much of the key cane growing area is expected to start receiving steady rainfall by the middle of next week, which will bring relief to cane growers.
Interested in more futures markets? Explore our Market Dashboards here.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
